X-coll is not good

Firstly, a very big apology to all of the mortgage brokers and other wiser investors on the forum over the years who warned me that getting heavily involved with one Lender was a very bad idea.


We ignored your sage advice, and barrelled head along into a financial relationship that can only be described as "all encompassing".....sure it got us access to funds but boy do we have a straight jacket on now.


Not only did we tie ourselves up with mortgages knotted like a ball of string after a kitten has played with it, but we also submitted ourselves to their ;

Other banking products
Health Insurance products
Home and contents Insurance products
CCs


It got to the point where the Bankers could click on their computer system and basically review our entire life within 5 minutes. Exactly what we got paid, what we spent, when we spent it, where we spent it and all of the shuffling of funds that goes with operating a decent operation.


This is all Jim Dandy when they wish to play the game, but when they say no, that straight jacket you've been slowly putting on and tying up suddenly starts to pinch. Perhaps it's just a sign of the economic times we find ourselves in. Perhaps not.


We have been attempting to extract a title deed off them for the past 5 months. Current LVR of just 48%. After extraction it would have been 51%. This would have provided enough funds for the family to live off for the next 6 years. We were keen to do this, to say the least. Bye bye job.


The wife and I have been toiling away on this task, along with 3 separate mortgage brokers for the past 4 months. One gave up early in the piece, the other two hung in there 'til stumps, but alas it was all in vain.


We finally received a letter from the Bank yesterday, after 4 months of nothingness, saying that they had reviewed our situation and concluded that we were never to be lent another cent. We've been with this mob for 15 years now and have never missed a payment, with half our loans pre-paid for the coming year. This matters not a jot. The loyalty and goodwill we assumed had been built up over that period was not there.


A panel review board of 9 Bankers in Sydney made the decision with no representation from our side and no avenue of appeal. They said they didn't want to "weaken their position" by releasing anything, in fact they stated they wanted more of both security and cashflow to furhter shore up their position. We are now without an option, we think.


I broke the news to the wife last night and we are both now scratching our heads as to what our next move is. We wish to have our cake and eat it, but alas it doesn't seem to be possible.


We started this property investing journey way back when, with a view to actually having some control over our destiny later on (i.e. now). We now find that we have very little control, and some nameless faceless bunch of folks over the other side of the country are dictating how long I must work for.


We tossed around a whole bunch of options to get rid of this straight jacket and gain some control back in our lives.....i.e. start eating some of the fruit of our labours. None are very attractive thus far, for reasons such as large CGT bills and also large jumps in re-fi costs.


We have an over-riding desire to keep the portfolio intact, as we think it will benefit us more long term than the grief we are going through at the moment.....but this may change if our lack of control and lack of options continues.


I'd be interested in your considered views & comments.


P.S. As part of the review process, the Lender emphasised that the only reason they left us alone for this year and didn't clamp down hard was the fact that I had renewed my contract to work another year.

P.P.S. Just started a new job last week....and it sucks.
 
None are very attractive thus far, for reasons such as large CGT bills and also large jumps in re-fi costs.
Hi Dazz.

Sorry to hear of your predicament.

You've obviously thought about the refinance path. Would it be possible to perhaps take a portion of the portfolio to another lender (and then work out a deal with them), or is the ENTIRE portfolio cross-collateralised :eek:.

It peeves me when banks treat loyal customers like this.

Regards
Marty
 
Hi Dazz,

I suspect that you've been told in no uncertain terms that if you try to remove a security you'll be required to reduce your liabilities to the lender more than what 'should' be the LVR against that product?

Unfortunately I don't see any way out of it short of moving absolutely everything. In the current credit market, this would be incredibly difficult as well and require a lot of good will from the other lenders. I doubt even selling a few properties would work (unless you sell everything).
 
Dazz, I truly am gutted for you, that really sucks a big one. :( And I can't believe that at 48% LVR they can do this to you! Are they stating any particular reason why, when they've been happy to ride this train up to this point, they're now unhappy at being on the journey?

I don't get why you can't refinance, but obviously smarter minds than mine have been applied to the problem and say that you can't, so I guess I have to take their word for it. If there's any light you're able to shed on whow this situation has come about without overly compromising your privacy, I'd appreciate more insight into why the lender is taking this stance. Or is it as simple as they've decided your ventures are more risky than they'd previously thought?

In any case, it's outrageous that simply because they're unhappy, they can tie the hands of investors with such an impressive track record. :mad:

Can you sell the properties to a new cloned trust (ie same beneficial ownership), and have that trust take out its own finance to pay out the old trust? I think you can avoid stamp duty that way but don't know about CGT... Actually if you sell to the cloned trust at a price that represents zero profit, you wouldn't have any capital gain to pay profit on, would you? ;) Whilst it would be a sale at a non-commercial price (ie "non-arms-length"), ironically, the bank just may have provided you grounds for justifying a fire sale price - saying that the bank's actions have substantially reduced the value of the assets by the position that they've taken, and that your selling at a very low price isn't because you're attempting to avoid tax, but because of the impact of the bank's actions on the value of the asset. Worth asking an accountant about that one, anyway.

Dazz, I think it's time to call in the big guns; the really excellent tax and finance lawyers that you so love paying a squillion dollars to for advice. :rolleyes: I assume you've thought of this; but seriously, I think you need the absolutely best silks in the country having a look at this.

Have you also looked at the Banking Industry Ombudsman? (Or are we "filthy rich investors" not covered by them? I confess I have no idea.)

In any case, I truly hope (and have faith) that you and Mrs Dazz are able to turn the tables, and ultimately get that lender bent over so they require liberal doses of lubricant... ;)
 
In any case, it's outrageous that simply because they're unhappy, they can tie the hands of investors with such an impressive track record. :mad:

Off course they can. It's their right to manage their actual or perceived risk and if that means refusing to change the terms of the loan (i.e. the number and value of properties required as security), that's what they'll do.

Dazz's time will no doubt come once credit gets a little easier, but as I have discussed on this forum previously (somewhat unpopularly, I know), LOE and capitalising payment strategies rely on the goodwill of lenders *which should never be taken as existing in perpetuity*.

Goodwill comes and goes with the market risk.
 
Thoughts when I read your post include -

1. Pay the costs to refinance (which may have to wait until your prepaid interest period expires). Although, will another lender want to tie you up the same as you already are tied up? Could you get several lenders to take over a portion each of your portfolio. Sounds very messy.

2. Sell one of your ressies and pay the tax, but it sounds like the bank would possibly hold most or all of the proceeds, and you may not see enough of it to give the job the toss.

3. Wait until your rents increase and live off the increase if it is enough to replace your salary. Didn't you post recently that in only a few months your cash flow will increase substantially due to a rent review?

4. Move back in the your parents (just joking :p).
 
LOE and capitalising payment strategies rely on the goodwill of lenders *which should never be taken as existing in perpetuity*.
Yes, I recognise they have a right (indeed, obligation) to manage risk. But if they think what he's doing is too risky for them, then they should release him to other lenders. Sounds like they want to keep his business, but at the same time strangle it.

If they were willing to release half his portfolio (by value) in exchange for him refinancing half the debt, I'd think that was reasonable, but my perception is that they're unwilling to release anything.

When one takes out a mortgage based on, say, a 60 or 70% LVR, provided you continue to meet DSR, I don't see why you should assume that a lender would later limit you to 48% LVR. That seems ridiculously conservative. And as I say, even if they do decide to limit you to 48%, they should at least give you the option of refinancing.
 
Dazz,

Mate that has got to be the bummer to end all bummers mate. Feel ya brother, feel ya.

Tracey,

Why 'should' they do anything that you have described? Banks are there to do one thng - make money for their shareholders. Dazz signed those contracts and unfortunately for him, the bank is just exercising their right to do business as they see fit.

Mark
 
OK, I'll shut up as I don't know enough of the specifics. I just feel for Dazz, and I know he's a smart cookie, so I'm feeling frustrated for him. I don't want to distract this into being a thread about whether the bank is right or wrong, anyway, as it's immaterial; I'd rather we focus on generating ideas to help Dazz. :)

If any accountants have thoughts about my suggestion of selling the assets at a low price to a cloned trust, I'd like to hear them (and perhaps Dazz would, too).
 
In any case, it's outrageous that simply because they're unhappy, they can tie the hands of investors with such an impressive track record.

If they were willing to release half his portfolio (by value) in exchange for him refinancing half the debt, I'd think that was reasonable, but my perception is that they're unwilling to release anything.

All Dazz has said is he wants to release a small amount of security (relative to the total) without reducing the loan (ie. up the LVR). Obviously they have their own ideas on acceptable risk but it isn't like they have prevented him doing business with other lenders on previous or future deals. He hasn't mentioned them preventing any large scale refinancing of security and debt to another lender, but then again I'm sure they'd have plenty of fees and some control over that too.

Does that new CFO still have his chequebook open?

Why 'should' they do anything that you have described? Banks are there to do one thng - make money for their shareholders. Dazz signed those contracts and unfortunately for him, the bank is just exercising their right to do business as they see fit.
Yep. Dazz has mentioned his careful 'tight' contracts with his customers on more than one occasion and now the bank is display/exercising such care with his! Not meaning to be spiteful or anything, just pointing out it isn't all one way/unfair.

Sorry, but I don't really have any solutions for you Dazz. Only suggestion would be to deternine something you like doing (aside from buying land ;)) and do some work or start a business in that field. You'll probably want something when you're 'retired' anyway.
 
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We finally received a letter from the Bank yesterday, after 4 months of nothingness, saying that they had reviewed our situation and concluded that we were never to be lent another cent. We've been with this mob for 15 years now and have never missed a payment, with half our loans pre-paid for the coming year. This matters not a jot. The loyalty and goodwill we assumed had been built up over that period was not there.


A panel review board of 9 Bankers in Sydney made the decision with no representation from our side and no avenue of appeal. They said they didn't want to "weaken their position" by releasing anything, in fact they stated they wanted more of both security and cashflow to furhter shore up their position. We are now without an option, we think.

We tossed around a whole bunch of options to get rid of this straight jacket and gain some control back in our lives.....i.e. start eating some of the fruit of our labours. None are very attractive thus far, for reasons such as large CGT bills and also large jumps in re-fi costs

By the sounds of things what is the downside if you sell, cop the GST
and everything that comes with it,you must be an very important customer for a panel of overpaid yes men to sit and discuss yours and your families future,or they may see you as a future problem,but then again that's why i have invested in Banks for a long time they make the rules,you sign the contract,and the second the ink is dry they have you by the balls there are no "in betweens",as they say it's a 2 way street but with the way the Banks now will operate,it's their way or the highway
i know a few people that are in the same boat as you,I hope it works out for you and your family,i would just like to know the banks name..
willair..
 
What happens if you tell them that you disagree with their conclusions, that you see almost no additional risk in them capitalising interest on your loan and hence they won't be getting more cash from you? Then you could quit your work - I'm sure you could find something to live off (or work 1 day a week work or something).

They wouldn't be happy, but from the sounds like it would only result in a small change in LVR before higher rents kick in and then LVR starts dropping? Are they going to start selling stuff on you? No doubt there would be some penalty interest rates and fees (which would only increase their risk...), but will that make a difference in the big scheme of things? Obviously give you a big black mark against your name, but unless they do anything dramatic like sell major assets, it sounds like your pretty set up with enough exposure so so what! :D Whats that saying about the small loan being your problem, and the large debt being the banks?
 
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Hey Dazz,

You've gone into this with a big picture mindset and need to treat this as another hurdle in the steeple chase you and Mrs. Dazz have embarked upon. Continue to focus on solutions and don't stop till you get one.

My question, and apologies if it is too elementary in the scheme of this "varied beast" (your words) of commercial property that you've set out to slay:

Will your ensuing market review of the CBD commercial property significantly bump up the net rent enough to allow a fresh valuation on that property and hence affording a stronger (on paper) equity position to allow you more room to negotiate? Also obviously further enhancing your servicability.
 
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if they think what he's doing is too risky for them, then they should release him to other lenders. Sounds like they want to keep his business, but at the same time strangle it.

Hi Tracey,

From a lenders risk point of view, even if they release half of his portfolio, they've still got the risk of holding the other half. From his track record they know full well that he'll be using this freedom to increase his borrowing with the new lender, hence their risk potentially increases by letting Dazz go elsewhere, even if they've shared the exposure with someone else.

Again from the lenders point, if they refuse to release any property, they'll gain control of their risk. By releasing anything they loose some control.

The only way I can see out of this is to move everything elsewhere all at once. Moving everything to one lender puts Dazz in the same position later on. Spreading it around is a logistical nightmare which releys on the different lenders to communicate with each other which they are never willing to do effectively.

Dazz, in your position I'd start my moving all my non mortgage products away from this lender. They can't force you to renew your insurance or use your credit cards.
 
Hi Dazz

Wow that's painful :eek: It will take some creative thinking and a lot of headaches and paperwork to get out of that corner.

I too used to think x-col was no biggie at all until I experienced the pain (seizing all funds upon sale of a property and wanting even more!) but I was only at the beginning of my journey so the mess was so much smaller. It was the same bank as yours. The credit situation was also more favourable. I now finance with anyone who will have me ;)

Recently we were offered a commercial credit facility with ANZ and we declined it on the basis that the facility was able to be reviewed yearly (and we personally can't control the sale or rental market so that was too much stress and risk for us), they wanted us to fix for years as a risk control and they wanted to control further lending against titles they weren't even holding as securities.

From my limited experience with commercial loans they are way more negotiable on the way in but much more controlling once you are locked in. They usually have the power to review your loan on a regular basis and this can mean asking you to cough up more money to reduce the facility limit. This woud likely cause a forced sale at a crap time.

The other issue with commercial lending is I understand that you are outside the consumer credit code and hence have far less protection from the banks.

One of my regular bankers has been in bankng for over 30 years and in a previous life was involved in effectively shutting down businesses during past credit crunches as businesses who had never failed to make their payments were suddently asked to reduce their loan balances. So I guess nothing surprises me. It seems that a good performance record is worth nothing.

My thoughts are less than cheerful.

Your neutral position - holding as is.

Your negative position - being asked to reduce your facilities in a significant way. How would you achieve this?

I think you do run the risk of being at the bank's mercy and from what I know of you that's the stuff your nightmares are made of.

If you did sell the property previously mentioned in another thread how would that effect your position? What would the bank's position be in relation to any sales proceeds? Can you ask them without putting any unwanted thoughts in their heads?

I think you need to take a long hard cool headed look at all the possible risks and work out how to best protect yourself. Just because you don't perceive any risks in your commercial ventures don't assume the bank feels the same way. In the end if the bank sees a risk (real or imaginary) it will then it will impact upon you. You are wanting to build wealth; they are wanting to mitigate their risks.

I think creating a pasive income is unfortunately in second place.

Banks have declined us recently due to "concentration risk".

Put a cap on lending limits due to "individual risk".

Like you our borrowings are large and LVR's quite low. The size of our portfolio seems to make banks nervous. If all goes well in our current refinancing we will have a pile of unencumbered properties and likely limited or no access to the equity. I guess (cross fingers) at least they will be in OUR hands and not the banks.

If I get any bright ideas I will post. Best of luck.
 
Hiya Dazz

I know it doesnt look that way right now, but its just another wall, another speed hump, and another challenge............cliche I know, but without challenge the achievements can sometimes be hollow.

Not dissimilar to a lot of my clients that rode the shares wave with highish LVR margins have had to take a hit and sit back for while.

Sit it out for a while, and thence take some new attacks.

I know thats not palatable.......................but it beats getting stressed about something you cant change ( at the moment) .

You have obviously been through the easy options ?

If you have lots of equity, maybe a second mortgage from another funder that will allow some of the equity to be attacked. Could have an issue with the deed of priority from the first lender..........but generally they will let this happen.

I dont believe that moving the whole caboodle and splitting it up is going to be easy either, though if the equity is there, it may be achievable, but gees what a mess .

Sit back, take stock, work for while longer until you really REALLY dont like it anymore, and a solution will come.

ta
rolf
 
Fortune favours the brave

Dazz - good on you for having the courage to start this thread.

Bugger!

Trust your honesty will be rewarded with a way to solve this dilemma.


Kind Regards
Sheryn
 
Thinking outside the box, in a brain storm, or cloud as they like it to be called now,
How about approaching an investor with lots of spare cash? They could take an equity position in one or all of the portfolio.
Approaching the tenants of the commercial property to buy the building, either as a straight buy, or a long term settlement so as to manage CG issues.
Converting the buy and hold strategy on the residential property or properties into wraps, or rent to buy schemes, even if the bank will take all of the proceeds when it sells in a year or two, in the meantime the income is increased.
2nd mortgages with private funders, used to start a second portfolio of properties that can be used in the future to leverage out the original portfolio.

I know alot of this sounds dumb, but thats what brainstorming is all about....
 
How about approaching an investor with lots of spare cash? They could take an equity position in one or all of the portfolio.

Have them pay the cashflow (while you quit your job) for a smallish stake. They would obviously have to be more tolerant of risk than those bankers though ;)
 
Dazz,

What a bummer. From people that know you better than I, I gather that you can be quite creative when you need to be and will work something out.

Cross-collaritalisation is something I have been continually told to avoid, I knew the main reasons why not to, but didn't realise the banks could/would control your portfolio to that extent. Who would ever guess they would be so restricting on a 48% LVR? I can hardly comprehend it!

We all learn more and more. . . . .:cool:

Regards Jo
 
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